Foreign aid has ceased to be about results

Harry FairheadJune 13, 2016 12:20 PM

The government usually acts or passes a new law because it has a certain outcome in mind. It might be ensuring that our roads are maintained or that our children get a good education. However, when it comes to our foreign aid programme, it seems to be all about the input – namely the target to spend 0.7 per cent of national income on foreign aid.

The ludicrousness of this is shown if you consider this is to ask whether it would be necessary to double our aid spending if our economy magically doubled in size overnight. Of course it wouldn’t.

And yet, 0.7 per cent of national income will be spent on foreign aid in perpetuity. The policy’s success is based on whether we can shovel enough taxpayers’ money out of the door. The policy effectively makes the outcome a secondary goal when it should be the sole focus.

Of course, nobody would argue against taxpayers’ money being used to those suffering from famine or another natural disaster but the vast majority of our aid is for development. And there are very serious questions for the development industry to answer about the effectiveness of their work and the value they provide for taxpayers.

There are the stories of rich gap-year students coming to help out on what is little more than a post-A level jolly. But more serious than this is the danger that the aid we give actually holds back the development of recipient economies.

While giving a country the money to build a hospital may sound like a great thing to do, it has only a temporary and very localised effect. The secondary, and more important long-term impact is that the country doesn’t develop its own institutions and tax systems.

The government of the recipient country would have needed to tax in order to build the hospital. But without the need to tax, the government hasn’t had to act legitimately such that its citizens will pay up on time and in full. There is no incentive for the government to respect its citizens and vice versa.

And imagine what happens to clothes shops in the developing world if you give your old clothes to a charity which gives them out for free. Of course, they suffer, the economy suffers and we further ensnare the country in poverty. You always hear of countries growing rich from trade and enterprise but you never hear of a country which got so much aid that it suddenly became a first world country.

Perhaps this is why it feels like promising to give 0.7 per cent in perpetuity suggests that we will never actually finish the job. Further shown by TaxPayers’ Alliance research that shows that aid does very little to promote freedom.

Besides, it has been shown that the government crowds out private donations by committing to spend such an enormous amount. The government has effectively nationalised the charity sector. The British people are very generous and they like to give to good causes, but they can only do so if government leaves money in their pocket to do so.

And the government may give taxpayers’ money to a cause they don’t support. It seems very unfair to make people tacitly support a charity or aim that they don’t personally consider to be worthy.

So, we should scrap the 0.7 per cent aid target. It makes no sense as a policy and it is very unlikely to lead to the best use of taxpayers’ money.

Would we advocate scrapping all aid spending entirely? No, probably not, but there should certainly be much stricter controls on how taxpayers’ money is spent and it is likely that we would save a great deal of taxpayers’ money.

Undoubtedly, we want to help the developing world so what could we do instead?

The first thing would be to get rid of the tariffs (and particularly the escalating tariffs) that discriminate against developing world farmers and destroy economies. One of the most egregious examples is coffee, where raw coffee beans attract a relatively small tariff but any refined products attract a larger one. As a consequence over 90 per cent of coffee exports to the UK and EU (which set this trade policy) are low-value raw beans. This effectively traps the developing country in poverty by stifling their economy and it is utterly immoral.

If we had to choose between foreign aid and reducing tariffs as the most effective way to help a developing nation the choice could not be clearer.

And we should recognise the importance of remittances (money sent home by people working abroad) which outstrips the cash we give 40 to one. If large cash transfers are the best way to help the developing world (and this isn’t necessarily true), then British taxpayer’ aid money is but a drop in the ocean.

We need to recognise that we aren’t always helping, that we still have a huge budget deficit of our own and that a fashionable policy isn’t necessarily a good one.